The Classic Restaurant Budget Income Statement - Case Study Example

CASE STUDY Name Class Instructor Institution City State Date 1 Executive Summary The purpose of this report is to prepare three budgeted financial statements; budgeted income statement, cash flow budget and budgeted balance sheet. Introductions are made as a support of the budgeted documents for the use of the manager as well as internal controls to help the budgets. According to this report It has forecasted that that Classic Restaurant is not stable on month of July as its making a profit of 271 but this is covered by the profit made in august and September of 2015. Increase of revenue and sales compared to previous year hence a clear showing it clearly that adapted strategies are profitable. The cash flow statement as indicated on bank balances in the two months. Contents 1Executive Summary 1 Contents 2 Introduction 3 Income Statement 4 Cash Flow Budget 4 Budgeted Balance Sheet 4 Internal Control 5 Segregation of Duties 5 Access Controls and physical controls Accessing control of The Classic restaurant needs to be handled strictly to prevent a risk of theft or fraud. This can be done by making sure the physical controls such as locked doors or password-protected for important files are working properly and that only limited people are to be given the access. Requiring staff to input their id and password when accessing certain data can also help in doing internal control as well as the effective staff signing in and out their shift so if any irregularities arise, it is easier for the tracing of whom to question (Shanker, n.d.).These are security measures concerned with the custody of company’s assets. 6 Limiting access 6 Data Collection 6 Recommendations 7 Conclusion 7 2Appendices 11 Appendix A – The Classic Restaurant Budget Income Statement 12 2 Appendix B – The Classic budget Restaurant Cash Flow Budget 14 3 Appendix C – The Classic budgetRestaurant Budgeted Balance Sheet 15 Introduction These budgeted financial statements are prepared by the Assistant Manager and to be presented to the General Manager of The Classic Restaurant. The purpose of this report is for the Assistant Manager to explain the prepared budgeted statements of the three months of year 2015 in the aim of making decisions. The report is limited to be used by only classic restaurant and has been limited to three months ion which according to the standards they are prepared annually. For this report to work internal control must be taken into consideration. The report is to cover three major areas the budget statements, cash flow statement, balance sheet and income statement also I have included recommendations and internal Budgeted Statements Income Statement The budgeted income statement shows the forecasted quarterly budget of revenue, expenses and net profit of the year. According to this report the organization will be making a loss in the first year the reason being that the previous moth is not included and most of expenses paid annually are paid that month the month of august and September is making more hence compensating for the previous month. According to (Dopson, 2009 ) profit cannot be major determinant of making decision as some expenses such as depreciation are not really paid in an organization. Cash Flow Budget Cash flow is related to income statement. From the cash flow budget, the pattern of inflows and outflows of cash for the three monthshence able to know how to pay liabilities and pay new assets. This able help to show the liquidy of the business (Schacter, M. 2002). The report shows that the company financial position as the bank balances are good for the three months regardless the making loss for the last month. The report shows about Budgeted Balance Sheet The budgeted balance sheet is made to reflect the forecasted value of a business and how well the assets have been utilized to produce affluence for the business owner (simon B, 2005), Balance sheet shows that the company has a less liabilities and more accounts payable which is a good thing but also very dangerous as these affects the supplies but suppliers are very vital and need to have good supplier management.in balance sheet thre more assets and liabilities hence good for business. Internal Control Internal control is important to check if there are irregularities such as errors or losses in the various area of the restaurant .By doing internal control, the risk of losses generated through theft or fraud can be reduced, especially embezzlement. By doing so, it increases the chance of achieving the budget set by the management ( Schacter, M.(2008) Segregation of Duties Itrefers to segregation of duties to company processes in the organization and all records must be well kept to ensure accountability. According to (simon 2005) every process must be counter checked by another. Some of of processes to be checked include purchase of fixed assets, record assets and keep assets. This help to reduce frauds. With good accountability there is a good possibility of meeting the budget. Access Controls and physical controls Accessing control of The Classic restaurant needs to be handled strictly to prevent a risk of theft or fraud. This can be done by making sure the physical controls such as locked doors or password-protected for important files are working properly and that only limited people are to be given the access. Requiring staff to input their id and password when accessing certain data can also help in doing internal control as well as the effective staff signing in and out their shift so if any irregularities arise, it is easier for the tracing of whom to question (Shanker, n.d.).These are security measures concerned with the custody of company’s assets. Limiting access To authorized people only. Direct physical controls include keeping assets under locked having employment of security guards, building fences and use of closed circuit cameras. Indirect physical controls include a use of a fixed asset movement registers and use of computers to record utilization of company vehicles. Data Collection They are controlled within the accounting function that checks that transactions are authorized and accurately recorded. These are aimed at ensuring completeness and accuracy of the accounting records. The key features are; Use of pre-numbered documents in processing transactions. Issuing documents in sequence when processing transactions.Monitoring movement of documents by use of a register in which all the people in possession of specific documents have signed that they are possession of those documents.(smith 1997) Recommendations Income statement help the manager in making decision such as stocks available and also able to know what we not paid others hence showing the investment on current assets. Income statement can be used to project the future sales of the restaurant. Cash flow statement show the profitability index and the liquidity of the organization which ensure that the business has cash to meet daily transaction. The cash flow budget projects the cash flow patterns, which can help in determining the optimal cash balance. Cash flow guide organization in procurement of fixed assets. Budgeted balance sheet is used to projects the performance of the business financial position when used along with cash flow the business can be able to use it to plan and know profitability of the project. Conclusion In conclusion, it is important for The Classis Restaurant to undertake budgeting of financial statements such as budgeted income statement, cash flow budget, and budgeted balance sheet. The making of these financial statements will assist the restaurant to control cost, make the purchase decision or as a guide to achieve the requirement of profit. Internal controls can be applied into to decrease the risk of theft or fraud that will then affect the ability of the restaurant to achieve the planned budget. In return, these budgeted financial statements can assist the manager with better planning and control of the restaurant operation. Reference List Dopson, L. R., & Hayes, D. K. (2009).Managerial Accounting for the Hospitality Industry. New Jersey: John Wiley & Sons, Inc Simon, B. (2005), The trouble with targets. OECD Observer, no. No. 246-247. Smith, PM., Mcgeary, M., (1997), "Don't Look Back: Science Funding for the Future." Issues in Science and Technology.http://www.questia.com/PM.qst?a=o&d=5000453016. Preetabh. (2010, August 27th). Advantages of Budgetary Control . Retrieved February 26th , 2012, from http://expertscolumn.com/content/advantages-budgetary-control Schacter, M. (2002). Not a Tool Kit. Practitioner's Guide to Measuring the Performance of Public Programs. Institute On Governance. http://schacterconsulting.com/docs/toolkit.pdf. Schacter, M. (2008), When Performance Targets Miss the Mark. The Globe and Mail, March . http://schacterconsulting.com/documents/targets.pdf. Surajkumar, P. (n.d.). A Study of “Budgetary Control System as a Tool of Finance Control”Need and mportance. Retrieved December 08, 2011, from http://www.scribd.com/doc/13044904/Need- and-importance-of-budgetary-control- system Measells, C. (2012). Retrieved January 23rd, 2012, from http://www.ideamarketers.com/?articleid=1090855. Perrin, R. F. (2012). Human Factors in Budgeting. Retrieved February 27th, 2012, from http://www.accountingformanagement.com/human_factors_in_budgeting.htm. Akintoye, I. R. (2008). Budget and Budgetary Control for Improved Performance:A Consideration for Selected Food and Beverages Companies in Nigeria. European Journal of Economics, Finance and Administrative Sciences , 9-10. Smith, PM., Mcgeary, M., (1997), "Don't Look Back: Science Funding for the Future." Issues in Science and Technology.http://www.questia.com/PM.qst?a=o&d=5000453016. 2 Appendices Appendix A – The Classic Restaurant Budget Income Statement 2 Appendix B – The Classic budget Restaurant Cash Flow Budget 3 Appendix C – The Classic budgetRestaurant Budgeted Balance Sheet Read More